U.S. tech stocks plunge, crude oil joins U.S. Treasuries as a safe haven: Brent hits six-month high, front-month premium nears decade extreme

During the global market sell-off at the end of October, crude oil and US Treasuries became some of the few assets to perform strongly against the broader trend. On Friday, US Eastern Time, the three major US stock indexes fell for the second consecutive trading day, with the Nasdaq down nearly 3% and the Philadelphia Semiconductor Index plunging 7.2%. Meanwhile, international oil prices rose by over 2%, with Brent crude futures closing at the highest level since April, and US Treasury yields continued to fall.

This Friday, US stocks, gold, and cryptocurrencies like bitcoin all declined, while US oil and US Treasury prices rose

Bloomberg noted that renewed risks of escalation in the Iran war and geopolitical hedging demand are supporting oil prices. The strength of the crude oil market is not only reflected in rising prices but also in the futures curve: the premium for near-month Brent contracts has climbed to historical highs, indicating intensifying competition for near-term supplies in the market.

US Tech Stocks Suffer Heavy Losses, Nasdaq Marks Largest One-Day Drop in Nearly Five Months

On Friday, the three major US stock indexes fell for a second straight day, with tech stocks bearing the brunt of the sell-off. The S&P 500 dropped 1.82% to close at 7,580.07 points, marking its largest one-day decline since June 5 and hitting its lowest level since September 16. The Dow fell 572.25 points, or 1.09%, to close at 51,770.31.

The Nasdaq Composite Index fell 2.86% to close at 25,437 points, also recording its largest one-day drop since June 5 and touching its lowest level since July 31. Over the week, the Nasdaq lost 2%, and it slid 5.3% in October, the biggest monthly drop since March 2025.

Semiconductor stocks dropped even more violently. The Philadelphia Semiconductor Index (SOX) tumbled 7.2%, the largest one-day percentage decline since June 2025. Intel fell as much as 31.4% intraday, ultimately closing down about 28.6%, the biggest one-day drop since July 1974.

This tech stock sell-off is related to concerns over corporate earnings and capital expenditures. Intel’s fourth-quarter earnings guidance released after the bell on Thursday fell short of market expectations. Amazon’s Q3 capital expenditures far exceeded expectations, free cash flow turned sharply negative, and its guidance for $220 billion in capital expenditures this year remains unchanged. Additionally, massive AI investments have deepened investor worries about the scale of tech company spending, cash burn, and investment returns.

Media outlets noted that the market is reassessing the scale and return outlook of the huge expenditures required for the AI infrastructure race.

Oil Prices Rise Against the Trend; US Oil Gains Four Weeks in a Row, Brent Crude Up Six Weeks Straight

In sharp contrast to the sell-off in tech stocks, international crude oil rebounded on Friday, closing up more than 2%. US WTI December crude futures closed up $2.12, or 2.08%, at $104.12 per barrel, the highest since September 15. Brent December crude futures rose $2.76, or 2.40%, to close at $117.64 per barrel, the highest since April 29.

Friday's rally extended crude oil’s multi-week streak. WTI crude was up 0.82% this week, marking a fourth consecutive week of gains, the longest winning streak since March 23. Brent crude rose 0.79% this week, its sixth straight weekly gain, one of the longest streaks since April 2.

October also saw robust performance: WTI crude was up 15.15% for the month, and Brent crude gained 13.63%.

The immediate support for rising oil prices comes from renewed tensions in the Middle East. Markets are concerned the Iran war could escalate, bringing renewed risks to shipping through the Strait of Hormuz and Middle Eastern energy facilities. Geopolitical hedging demand is thus boosting oil prices.

Bloomberg pointed out that the last batch of near-month contracts for 2026 expired on Friday, with some intraday contracts touching $118 per barrel, close to the highest closing price this year. The strength in oil prices is now reflected in the futures curve as well.

Brent Near-Month Contract Premium Hits $2 Over Distant Months, Indicating a Tighter Oil Market

More noteworthy than the absolute price is the signal released by the crude oil futures curve.

Bloomberg reported that the Brent crude term settlement price spread has entered a historically high backwardation range. After Friday's contract expiration, the six-month moving average of this spread rose to around $2, near the highest level in at least a decade.

Backwardation means the price for prompt oil delivery is higher than that for later delivery. This usually signals greater emphasis on immediate supply: buyers are willing to pay a premium for crude that can be delivered soon rather than waiting for future supply.

The expanding near-month contract premium shows that market tightness is not only driving up overall crude prices, but is also changing the relative pricing among various delivery months.

Bloomberg believes this persistent spread structure indicates that bullish momentum in crude oil is migrating from absolute prices to the near-term market. With the January 2027 contract becoming the new front-month contract next week, the crude oil market may continue to diverge from the macro market’s deleveraging movements.

However, backwardation itself does not necessarily mean supply shortages will persist or that oil prices will keep rising. Geopolitical risks, real supply changes, and contract rollovers may all affect spread movements.

US Treasury Yields Fall for Consecutive Weeks; Safe-Haven Trading and Oil Price Gains Occur Simultaneously

Amid the stock market sell-off, US Treasuries are also being favored as a safe-haven asset.

On Friday, the US 10-year benchmark Treasury yield briefly fell below 4.89% intraday, the lowest since September 10, marking the second day of falling yields and the fourth straight week of declines—the longest such streak since October 2025.

The 2-year Treasury yield, which is more sensitive to interest rate prospects, dropped below 4.56% during European trading hours, the lowest since September 10. This marks the third consecutive day of falling yields and the fifth consecutive week of declines—approaching the longest streak since 2020.

Falling yields mean higher bond prices, reflecting that investors have increased allocation to US Treasuries amid stock market volatility. Unlike the usual dynamic where rising oil prices stoke inflation expectations and push yields higher, Friday saw crude prices strengthen while Treasury yields retreated in tandem.

Bloomberg’s central view is that, amidst heightened macro market volatility and reductions in investor risk exposure, crude oil is demonstrating a trajectory distinct from traditional risk assets. At least judging from this week, oil price strength is supported not only by geopolitical hedging demand but also by the increased premium of near-month contracts.

As the January 2027 contract becomes the new front-month next week, whether crude oil can continue to remain decoupled from the prevailing macro market deleveraging trend will depend on the Middle East situation, recent supply risks, and how tightness in the spot market is reflected in the futures curve.